This article appears in the April 2026 issue of The American Prospect magazine. If you’d like to receive our next issue in your mailbox, please subscribe here.
Chains of Command: The Rise and Cruel Reign of the Franchise Economy
By Brian Callaci
University of Chicago Press
Twenty years ago, Bhupinder “Bob” Baber shot himself three times in the chest with a .380 handgun inside the bathroom at his friend’s Quiznos in Whittier, California. Baber ran two Quiznos in nearby Long Beach, and at the time of his suicide, he had sunk $100,000 and 18 months of his life into litigating Quiznos over a venue and arbitration clause, before the court ever got to hear the merits of his case.
The Toasted Subs Franchisee Association, of which Baber was a member, published his last words on their website, describing how the legal dispute had ruined his life. “My struggle will continue after my sacrifice,” he wrote.
In response, Quiznos accused the Toasted Subs Franchisee Association of exploiting Baber’s death, and demanded they instead publish an apology calling their own actions “morally reprehensible,” as well as dropping any and all legal claims moving forward. This would cure the association’s supposed breach of contract.
The association refused, and so 11 days after Baber’s death, Quiznos terminated its contracts with the Toasted Subs Franchisee Association’s eight board members. Seventeen days after his death, Quiznos notified its remaining franchisees that “from time to time, we need to take the steps necessary to protect the brand, as we have in this case.”
Chains of Command: The Rise and Cruel Reign of the Franchise Economy, by Brian Callaci, unbundles the business and legal strategy behind why a franchisor’s branding power is inextricably tied up with the treatment of its franchising partners. The story begins with Dunkin’ Donuts founder William Rosenberg, who banded together with other early franchisors as the International Franchise Association (IFA) in 1959. The IFA had a simple goal: protect franchisors from antitrust enforcement and organized labor. And they triumphed. “The IFA is the umbrella entity that, along with individual Franchisors, has enough money and power to buy the legislation that protects the Franchisor, and exploits the Franchisee,” Baber wrote in his suicide note.
It took decades to accomplish. But the IFA achieved near-immunity from the antitrust laws thanks to a dispute between a chain of retail electronics stores and a television maker. Before 1977, franchisors restricting how a franchisee operated their business was presumptively illegal under the antitrust laws. But in Continental T.V. v. GTE Sylvania, the Supreme Court upended this precedent by requiring that any alleged harm in a vertical relationship be analyzed on a case-by-case basis. No longer would franchisors need to fear the “haunting question” of the Sherman Act, the IFA’s attorney Philip Zeidman said afterward.
The Fight for $15 emerged from 50 years of franchisors successfully keeping organized labor away from their franchisees.
Sylvania was the culmination of a legal effort begun in 1962, when a young lawyer, Robert Bork, addressed franchisors at the IFA’s first legal symposium on the subject of vertical restraints. Callaci says it’s “less clear” how deeply Bork and other pro-monopoly economists and lawyers, who would come to be known as the Chicago school (named after the University of Chicago), coordinated their legal strategy with the IFA. But Justice Lewis Powell, who wrote the Court’s opinion in Sylvania, wrote the names of three Chicago school leaders in his pre-conference notes: “Posner, Baxter, Bork.”
The Chicago school’s origins are less grand than the world its movement birthed. University of Chicago professor Aaron Director’s key ideas, as Richard Posner later wrote, did not “emerge from a full-blown philosophy of antitrust” but from “pondering specific questions raised by antitrust cases,” and only in retrospect did they constitute the basis of a new general theory of antitrust. In the 1950s, Director argued with students and colleagues—Bork, Posner, and William Baxter—over tie-ins, resale price maintenance, and predatory pricing; that is, some of the precise vertical restraints at the core of the franchise business model.
Cases after Sylvania cemented the legal architecture of the franchise model’s use of vertical restraints. A federal court found in Principe v. McDonald’s that McDonald’s licensing agreement and the store lease were not two separate products, but the same thing, endorsing the IFA’s view that it sold a unified “business package.” After Principe, every condition imposed by a franchisor protected the brand.
Callaci’s history brings clarity to when the rote abuses by franchisors metastasize into the public’s eye. For instance, Quiznos’ scorched-earth legal campaign against Bob Baber and the Toasted Subs Franchisee Association was supposedly about protecting the brand image. Yet one of the executives tasked with that duty had just been charged with attempted child trafficking. Three months before Baber’s death, a senior vice president for the company’s marketing team, Scott Lippitt, had been charged with attempting to sexually exploit a girl he believed was 13 years old. Quiznos fired him shortly after and he pled guilty the following year.
Seven years before the FBI charged Jared Fogle with possessing child sexual abuse materials and paying for sex with minors, Cindy Mills, a Subway franchisee, warned the franchise’s chief marketing executive, Jeff Moody. “Please don’t tell me any more,” Moody said. “Don’t worry, he has met someone.”
That same year, Moody sent Fogle and his 60-inch-waist pants on a Tour de Pants, which included stops at elementary schools.
BY THE END OF THE 1970S, a yearslong battle led by anti-monopolist franchisees attempting to assemble their own counterweight to the IFA through federal and state legislation ended in failure, and the Federal Trade Commission’s prior skepticism of vertical restraints in franchising collapsed. “The law of the land is wrong,” the new FTC chief economist, Robert Tollison, said. The FTC instead established an IFA preferred franchise rule that required franchisors to disclose “buyer beware” to franchisees rather than address the vertical relationship itself.
Franchisees and their lawyers had disagreed about whether they were small-business owners or workers, and that prevented them from assembling a proper opposition to the IFA. Some franchisors feared that franchisees would see themselves as workers. But Thomas Murphy, a franchise consultant and advocate, understood that they entered into franchising to escape wage labor and secure property rights over their businesses.
Murphy’s publication, the Continental Franchise Review, acknowledged disclosure was never the issue: “It was the accompanying heavy-handed attempts to otherwise regulate the in-term relationships between the franchisor and the franchisee.”
The defeat left franchisees who had just spent a decade fighting the IFA over vertical restraints shell-shocked. They could blame everybody: the courts, their lawyers, the IFA, the FTC, state and federal lawmakers.
But even after the victory, franchisors still needed to enlist their franchisees as the public face for a deregulatory agenda. They possessed the legitimacy and access to lawmakers that big business did not have because they tended to be “politically influential leaders and employers in their local communities” while being spread across the entire country. Franchisees resisted linking arms with their overlords at first, but were eventually won over on taxes, regulations, and labor relations.
The armistice didn’t last.
PepsiCo acquired Kentucky Fried Chicken in 1986, angering the Association of Kentucky Fried Chicken Franchisees, because it refused to honor the settlement agreements from an antitrust suit the decade before. The Kentucky Fried Chicken Franchisees’ contract with KFC gave franchisees freedom from some vertical restraints and included the “permanent right to renew on the same terms.” But PepsiCo removed all of those in 1989 and inserted language for a “forum clause” requiring all litigation to take place at its headquarters.
Three years later, Iowa restored the concessions PepsiCo stripped from the Kentucky Fried Chicken Franchisees through legislation: good-cause requirements for termination, territorial protections, sourcing freedom, and the right to transfer a business. The IFA spent years trying to roll back the Iowa law in full but couldn’t. In 2002, the IFA called it “the worst law in the country.”
IN THE MID-2010S, THE IFA once again needed franchisees on their side to fight an increased minimum wage. And they characteristically obliged.
Ray Kroc of McDonald’s, in his 1977 memoir, Grinding It Out, boasted about how the company defeated attempts to organize their stores: “[W]e don’t fool around. It’s always shocking to be a loser.”
But in the ensuing decades, the economic composition of who is a franchisee operator had changed. While there were more single franchisees than ever, their share of the total business fell sharply. By 2003, 80 percent of franchisees were single-store operators, but their stores represented less than half of franchisee businesses.
This new consolidation brought new dynamics for the IFA. Multi-store operators had the leverage to negotiate more favorable contracts with the franchisor, but cared less about the vertical relationship itself, and more about how to drive their labor costs down.
“They say the franchisee is just a small man in the middle,” Jorel Ware, a minimum-wage McDonald’s worker in New York, said. “Then who am I?”
In 2009, a supervisor at a Domino’s franchise in California sexually harassed and assaulted a 16-year-old girl working at the same location. She successfully sued the franchisee and franchisor, with the former declaring bankruptcy. But the Domino’s brand said it faced no liability since the franchisee was an independent contractor, meaning the franchisor’s assets were untouchable. The court disagreed, holding that the franchisor’s significant control over the franchisee rendered Domino’s liable. But a later court overturned the lower court’s decision, because of the franchise business model’s “importance to California.”
By defeating the “No. 1 case of the year,” as the Franchise Times called it, the IFA succeeded in the lobbying and legal strategy Sylvania blessed decades before. Intentionally or not, this stoked the Fight for $15 movement, which kicked off just a few years later. Organizers channeled the Domino’s suit into a grassroots campaign, merging it with the poverty wages paid in fast food. “[U]sed to be, people were glad to have a job, and now you’ve got a big shift,” a franchise consultant told Franchise Times. “You’re entitled, you’re entitled, you’re entitled.”
The best retort to the $15 demand IFA could muster was the claim that bad jobs are better than no jobs. Seattle and a nearby suburb passed laws raising the minimum wage to $15 by classifying franchise locations as large businesses rather than independent small businesses. The IFA responded: “The franchisor, which is the corporate entity, protects its trademark by providing franchisees with marketing, administrative and technical assistance. But it clearly doesn’t set the wages of franchisee employees.” It then sued Seattle.
In the following years, the second Obama administration’s National Labor Relations Board issued 181 unfair labor practices against McDonald’s and its franchisees, and issued a ruling that a subcontractor and its corporate partner were joint employers for the purposes of collective bargaining. The IFA responded by telling lawmakers that not only under Sylvania, but because of trademark law, the NLRB and the Department of Labor were wrong. The IFA’s president and CEO said the NLRB and the Service Employees International Union coordinated an assault “to destroy the franchise model” because “you can’t unionize one by one.”
The IFA created vice president roles for franchisees and organized 60,000 of them for lobbying blitzes across the country. Some franchisees resisted, but ultimately were more skeptical of organized labor. Nonetheless, SEIU threw its political muscle behind franchisee-friendly legislation in California.
It seemed like SEIU was gaining momentum—and then Donald Trump won. His NLRB overruled the new controlling joint employer standard. In 2022, President Biden’s NLRB reversed course with a rule that briefly took effect before federal courts blocked it.
The following year, the IFA cut a deal with SEIU to raise the minimum wage to $22 an hour and establish a first-of-its-kind sectoral council governing wages and working conditions in fast food.
“If you look at this agreement compared to what it could have been, it’s far superior,” IFA president and CEO Matt Haller said. In return, SEIU agreed to halt lobbying in California for a joint employer rule. The franchisors escaped joint liability for store employees and “saddled the franchisees with the higher minimum wage,” Keith Miller, a franchisee leader said. “[T]here wasn’t true franchisee representation in the room, yet they will bear the cost of it.”
Two years later, a Burger King franchisor at a sectoral council meeting said: “If we make money, if we don’t make money, [franchisors] collect that fee. So I would ask the council to consider—beyond just minimum wage—how to get the franchisors involved in this conversation and help out our cause.”
Callaci sees an opportunity for franchisees to challenge franchisors, despite the contracts that control how they can fight back; he says they fit the late Mike Davis’s characterization of small-business owners as “prisoners of the American dream.” The opening exists. But so did pro-franchisee laws in Iowa, and Bob Baber’s forum clause was in Colorado, not California.
This article appears in Apr 2026 issue.
